David J. Pfeffer, Sean T. Scuderi, Eric Zipkowitz and Brian J. Markowitz | Tarter Krinsky & Drogin
Construction delay damages are a frequent source of dispute on construction projects. When delays occur, owners and contractors often seek to recover increased costs, extended general conditions, lost productivity, and, in some cases, lost profits.
To succeed on a delay claim, a party must typically show that the delay was excusable, compensable, and not concurrent, and must be able to quantify its damages with reasonable certainty. Many contracts require timely notice of delays, and often require detailed project records, such as schedules, daily reports, and cost data, to substantiate the delays and the resultant damages. These clauses are generally strictly enforced by the Courts in New York, and failure to follow the contractual notice provisions can be deemed a waiver of the claim.
Structuring Delay Damage Provisions in Construction Contracts
Contractually, one can choose to address delay damages via so-called “liquidated damages” or by providing for a calculation of “actual delay damages”. In either case, there is likely to be a discussion of “capping” the contractor’s total liability. Whether liquidated or actual, a well drafted delay damages provision will not only outline the method of calculating damages, but will also clearly address the agreed upon procedure for requests for extensions of time (EOTs); require prompt written notice of events or circumstances that might reasonably be expected to result in an EOT request; and will set forth a defined dispute resolution path so as to help mitigate the period of delay/total damages incurred.
Another way to address delay, is through a “no-damages-for delay” clause. This contract provision provides that a contractor is entitled to an extension of time to complete the contract for its own excusable delays, but is not entitled to any damages or extended general conditions. New York courts generally enforce “no-damages-for-delay” clauses, but important exceptions exist, including delays caused by the owner’s bad faith, gross negligence, active interference, or delays that were uncontemplated at the time of contracting.
Parties should ensure that their contracts clearly define rights, obligations, and procedures related to delays. The following provisions are particularly important to address:
Key Provisions
- Define remedies and triggers: Specify whether the contract uses liquidated damages, actual delay damages, or both, and state when each applies (e.g., late completion vs. breach of contract);
- Clearly define “force majeure” and “excusable delay” to avoid disputes in connection with EOT process;
- Establish a clear EOT procedure and claim process (timing, content, supporting evidence); and
- Mandate prompt/immediate written notice of both potential and actual delay events and a deadline for EOT claims; with waiver/forfeiture of claim for late notices.
Other Considerations
- Liquidated Damages: when employed, must be based on the parties’ “reasonable estimate” of potential actual damages. Courts may refuse to enforce LDs that function as “penalties” rather than genuine estimates of probable loss.
- Require contemporaneous records: daily logs, weather reports, accident/incident logs and reports, delivery receipts, manpower/equipment charts, change orders, etc.
- Mitigation obligation: both parties should be obligated to use commercially reasonable efforts to mitigate losses and document mitigation efforts.
- Waiver by silence/course of dealings: failure to object or to follow notice provisions can result in a deemed “waiver” of rights to claim or enforce liquidated damages.
When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 801.641.8304, or email experts@adviseandconsult.net.